Compliance
Voluntary Disclosures Program Overhaul: How to Use the New CRA “Safe Harbor” Changes
Effective October 1, 2025, Canada’s CRA expanded the Voluntary Disclosures Program (VDP) with simpler forms, broader eligibility, and a two-tier relief system—offering upto 100% penalty relief in certain cases.
By NomadicTax Research Team • 5-8 min read • November 21, 2025
## What Are the Changes to the VDP?
- The CRA’s **Voluntary Disclosures Program** was updated on **October 1, 2025**, to make it more accessible, simpler, and fairer. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/changes-vdp.html?utm_source=openai))
- Key updates include:
* A **simplified application form** (RC199) and easier steps to apply. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/changes-vdp.html?utm_source=openai))
* **Increased eligibility**: if you receive an educational letter or communication about potential non-compliance, you may now still be eligible. Previously, certain prompted communications made eligibility questionable. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/changes-vdp.html?utm_source=openai))
* **Updated relief options** with two tiers:
- **General relief** for unprompted applications: **75% relief** on interest and **100% relief** on penalties. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/changes-vdp.html?utm_source=openai))
- **Partial relief** for prompted applications: **25% relief** on interest, up to **100% penalty relief**. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/changes-vdp.html?utm_source=openai))
* Clearer documentation requirements across both income tax and GST/HST contexts. Foreign-sourced income or assets require records going back 10 years. Canadian-sourced: 6 years. GST/HST records: 4 years. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/how-apply-vdp.html?utm_source=openai))
## Why These Changes Matter
- The updated VDP lowers the barriers for honest taxpayers to correct mistakes—**without risking auditing or prosecution** under the right conditions. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/ic00-1/ic00-1r7-voluntary-disclosures-program.html?utm_source=openai))
- With different relief levels, being proactive (unprompted) will save you more on interest. Timing and how you initiate the disclosure now matter more than ever.
- Improved eligibility means taxpayers who receive earlier types of communication can now take advantage of the VDP, whereas previously that may have disqualified them. More people can come forward.
## How to Use the Updated VDP: A Step-by-Step Guide
1. **Determine if your situation qualifies**
- Did you miss filing one year or more?
- Did you fail to report income, claim ineligible expenses, or have undisclosed foreign income? ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/eligible-vdp.html?utm_source=openai))
- Have you been audited or under investigation? If yes, VDP likely unavailable. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/eligible-vdp.html?utm_source=openai))
2. **Choose whether your disclosure is unprompted or prompted**
- Unprompted: no specific communication or notice about your error.
- Prompted: for example, after receiving a CRA education letter or compliance communication. Each path brings different relief.
3. **Gather required documentation**
- Income, foreign income, taxes, GST/HST records—based on the timelines appropriate. Voids for no errors need not be included. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/how-apply-vdp.html?utm_source=openai))
4. **Submit Form RC199 (VDP application)**
- Electronically via CRA’s My Account, My Business Account, or Represent a Client, or by paper/fax/mail. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/how-apply-vdp.html?utm_source=openai))
5. **Confirm payment or arrange to pay what you owe**
- You will need to either pay or arrange payment for taxes owing as part of your application. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/how-apply-vdp.html?utm_source=openai))
## Examples
- **Scenario A (Unprompted):** Raj notices he accidentally under-reported foreign income in 2021 and has not received any communication from the CRA. He completes RC199, includes all required documents (10 years foreign income), and submits the application. His relief would be 75% interest relief and 100% penalty relief.
- **Scenario B (Prompted):** Maria gets an educational letter from CRA about ineligible expenses she claimed in 2022. She corrects her filing with RC199, includes supporting documents, and claims partial relief—25% on interest and up to 100% on penalties.
## Important Things to Know
- **Effective date matters:** These changes apply to VDP applications **received on or after October 1, 2025**. Earlier applications are governed under old rules. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/ic00-1/ic00-1r7-voluntary-disclosures-program.html?utm_source=openai))
- **Not available during audits:** If you are currently under audit or investigation for the issue at hand, you’ll need legal/tax advice as VDP exclusion applies.
- **Documentation is key:** Without proper supporting documents, you risks delays or denial. Foreign income claims especially require long-term records.
## Takeaway
If you have tax errors or omissions, now is a good time to take corrective action. The updated VDP provides a clearer, more accessible path to set things right with reduced financial consequences—especially for those acting early and proactively.